1. Executive Summary
1.1 Research Overview
This research report is designed as phase 1 of a larger
study into electronic component distribution models. Its purpose is to uncover
the underlying perceptions of a particular customer segment (in this case, the
CEM sector), looking at their views on current distribution models and
assessing their strengths and weaknesses. The research behind this report is
based on in-depth, qualitative research interviews with Global, European and UK
CEMs.
We chose the CEM marketplace as this is the largest customer
segment by value; it is also diverse and the most challenging for a distributor
to service. We also chose to specifically examine one customer segment and its
relationship with distribution as we believe that each customer segment has its
own unique challenges and must be viewed in isolation to gain true insight.
The detailed objectives of this report are
varied but the overriding goal is to give information and suggestions that will
help distributors and component manufacturers become more successful:
- By providing distributors with a better understanding of how they are perceived in this marketplace and how the varied distribution models compare.
- To illustrate distribution model successes and failures; and, highlight opportunities for improvement and ideas for future direction.
- To give suppliers a clear understanding of how this market works, how they could best service the market directly (or via distribution); and, what channels to market would best suit their product in this market.
The research aims were to:
- Expose the electronic component industry to independent market research. We do not believe that truly independent research of this type has been previously carried out.
- Using both qualitative and quantitative techniques to gain genuine insight into the marketplace that gives both a feel and measurement for what is happening.
- Understanding in detail the CEMs perceptions of the relative importance of the various services offered by distribution; the relative merits of the various distributor models; the reasons for choosing and changing distributors; the failings of service at the moment; the wishes for future service; and, the merits and failings of individual distributors.
- Giving feedback, both to distributors and manufacturers, to understand how they can be more successful in this market, by addressing either the market directly or via specific channels.
- Bringing new ideas and new perspective to help the industry as a whole.
We would like to view this as a starting point, from which
we can then look at other customer segments or specific areas of interest
raised in this report.
1.2 The Importance of Services
One of the most critical sections of the research was the
discussions around the importance of distributor services. This produced a
ranking of service types as illustrated below. Quality, Customer Service, Price
and Inventory were all rated relatively closely and are defined in this report
as tier 1 services.
Figure 1.1, Importance of
Services
Quality
Although Quality was consistently the top rated service it
is also typically regarded as a “given”; either you meet the criteria or you
don’t. Thus, most of the distributors were rated generally high in this area.
The key concern within Quality, for some CEMs, was counterfeit product.
Customer Service
Customer Service was ranked second in importance for CEMs
and is an area of clear differentiation for distributors, particularly where
CEM customer service requirements vary widely. Key areas of
note within Customer Service are:
- Quotations
- Relationships:
o
Strategic v’s Local/Tactical Relationships
o
Quality of Internal Contacts
o
Quality of External Contacts
Price
The issue of price seems to cause some differing opinions. Price
stability was a requirement consistent across all CEMs and was essential to the
CEM’s profitability. They are restricted by their terms with their end customers;
indeed, in many cases, fixed term pricing is a pre-requisite to quoting. It is
also clear that different end customers and contracts have different
sensitivities to price.
The divergence of opinion seems to come when discussing the
importance of a competitive price. We concluded that lowest price was hardly
ever a deciding factor in isolation, but should be seen as a key factor
alongside, stock, terms and conditions, service, price stability and trust.
Building trust in the quoted price was seen as critical,
because the alternative was a constant re-quoting and benchmarking, leading to
an inefficient service.
Inventory
The importance of inventory is obvious in that it is
traditionally the primary function of a distributor. Indeed, in some cases, the
CEM’s ‘go-to-market’ strategy was based on their short lead times and
flexibility, thus the ability to source inventory quickly through distribution
becomes essential.
CEM
requirements of distributor inventory services seemed to fall into four major
areas:
- Formal reserved stock against a buffer, consignment or forecast agreement to service on- going business
- NPI or prototype stock for small volumes across a wide range of parts
- Commodity stock for general business at a competitive price
- Informal reserved stock held at the distributor’s risk
The mix of these service requirements varied between CEMs
and the distributors, each had their strength e.g. catalogue distributors were
strong in NPI and global distributors were strong in formal reserved stock.
Online Services
This was seen as a tier two type of service; not an
essential service. In some cases it was thought of as being inefficient and
taking too long, although it was regarded as useful for NPI and prototype
purchasing. CEM engineers regarded these services as very useful, however much
of the engineering involved was not done by the CEM. The catalogue distributors
were recognised as ‘best in class’ for this service.
Value Add
This was a contentious area. Although ranked as a tier two
service, there were extremes of opinion. Global CEMs generally ranked value add
as a very important whereas local CEMs thought the opposite. The definition of
value add varies tremendously; many opinions related to the holding and
managing of inventory using logistic services, however there were a raft of
other services included in this area, e.g. PCNs, programming, taping and
reeling plus others. This is an area that could very well merit a more deeper
understanding. It should be noted that if we took the ratings from the
global distributors in isolation Value Add would become a 5th tier
one service.
Technical Support
The CEMs primarily saw technical support as an area of
interest for their end customer who would do most of the design work. This
obviously leads to a potential disconnect between the design support from the
distributor at the end customer; and, the purchase of product by the CEM, which
infers a commercial as well as technical approach from the distributor. The
perceptions of where the technical support comes from also varied widely, from
the manufacturers, to the rep’ing agents, to distributors or design houses. The
perceived best support could be from any of these sources and their use was
seldom strategic.
There was also a danger for this service to be seen as a
negative to the CEMs as they often resented being told where to buy the product
and the by the margin they received due to the use of design registration
schemes, protecting the distributors design work.
1.3 Models of Distribution
We chose to break the models of distribution into the
following areas, Global, Broadline, Specialist, Catalogue and
non-franchise. Each model was perceived
as having a different set of pros and cons. Clearly not all distributors fit
neatly into these models; however it gave us a good framework for analysis.
Global distributors
received a very broad collection of views, the largest factor was the model of
the CEM. Fundamentally, if the CEM was global or international, the feedback
was broadly positive and if local the feedback was negative.
___________________________Extract finishes ________________________________________
If you'd like more information then please contact Geoff Fitzgerald on +44 1865-390797 or geoff.fitzgerald@tech-research.co.uk; or, Greg Nicol on +44 7551-660721
Table
of Contents
1 Executive
Summary
1.1 Research Overview
1.2 Conclusions
1.2.1 The Importance of Services
1.2.2 Models of Distribution
1.2.3 Choosing and Changing
1.2.4 Frustrations
1.2.5 Future Requirements
1.2.6 Specific Distribution Feedback
2 Implications for
Distributors and Suppliers
2.1.1 CEM Expectations versus Distributor Service Delivery
2.1.2 ‘One Size Doesn’t Fit All’
2.1.3 Winning & Losing Business
2.1.4 Differentiation through Customer Service
2.1.5 Differentiation through Other Services such as Price,
Inventory, Value Add, etc.
2.1.6 Distributor Implications: Global/Broadline
Distributors
2.1.7 Distributor Implications: Other Distribution Models
2.2 Supplier Implications
2.3 Final Comments
3 Research Overview
4 Importance of
Services
5 Models of
Distribution: Strengths & Weaknesses
6 Choosing and Changing
Distributors!
7 Future Requirements
8 Distributor Specific
Feedback
8.1 Global Distributors
8.2 Catalogue Distributors
8.3 Non-Franchise Distributors
8.4 Specialist Distributors
8.5 Broadline Distributors
8.6 Other Distributors
8.7 Distributor Summary
8.2 Catalogue Distributors
8.3 Non-Franchise Distributors
8.4 Specialist Distributors
8.5 Broadline Distributors
8.6 Other Distributors
8.7 Distributor Summary
9 Appendix
9.1 Research Overview & Methodology
9.2 Research Discussion Guide
9.3 Terms & Conditions
9.2 Research Discussion Guide
9.3 Terms & Conditions
Do you need some
insight in a specific area? If so, contact us now on:
Email: geoff.fitzgerald@tech-research.co.uk; Tel: +44 7710-573688
Insights & decisions made easy...
www.tech-research.co.uk
Insights & decisions made easy...
www.tech-research.co.uk
No comments:
Post a Comment